How capital intensity affects technical progress: An empirical analysis for 17 advanced economies
Alessandro Bellocchi,
Giuseppe Travaglini and
Beatrice Vitali
Metroeconomica, 2023, vol. 74, issue 3, 606-631
Abstract:
In this paper we present a model of economic growth with endogenous technical progress. We test if the neoclassical growth model accepts the assumption that capital intensity affects Total Factor Productivity (TFP) in the long run. Our view takes inspiration from Kaldor's growth model of 1957 in which the Technical Progress Function (TPF) responds to the joint behavior of capital intensity and inventiveness. We find that “movements along a production function cannot be distinguished from shifts in this function” as formalized by the TPF. The model is tested using a Structural VAR for 17 advanced economies, over the period 1980–2020. On impact, when capital intensity improves, TFP increases sharply. This response is large and persistent over time and explains about half as much as of measured TFP. It confirms that capital intensity is an omitted variable in the traditional scheme used to estimate technical progress. Notably, the standard neoclassical growth model is not consistent with this evidence. Our analysis also shows that demand shocks can have permanent effects on output and unemployment. Finally, monetary policy helps to stabilize the business cycle, but loses its effectiveness in the long run.
Date: 2023
References: Add references at CitEc
Citations:
Downloads: (external link)
https://doi.org/10.1111/meca.12421
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:metroe:v:74:y:2023:i:3:p:606-631
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0026-1386
Access Statistics for this article
Metroeconomica is currently edited by Heinz D. Kurz and Neri Salvadori
More articles in Metroeconomica from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().